February 2026 New York Insurance Coverage Update

First Department Finds Ambiguity In Exception To Exclusion And Interprets It In Favor Of Coverage

Mount Hawley Insurance Company issued a commercial general liability policy to a contractor that excluded coverage for property damage resulting from the insured’s labor, except for “interior tile” work. The insured contractor was retained to refurbish a bathroom. To level and prepare the bathroom floor for tiling, the insured’s laborer used welding equipment to secure a metal hatch door, which caused a fire and resulting property damage. The insured sought coverage for its liability for the damage under its policy and Mount Hawley denied coverage on the basis that the insured’s welding work was excluded. The insured maintained that “the welding work was preparatory to the ‘interior tile’ work, which is covered by the Policy.” The Supreme Court granted Mount Hawley’s motion for summary judgment for a declaration of no coverage and the insured appealed. The Appellate Division, First Department, reversed, finding the exclusion and the “interior tile” work exception ambiguous. The court explained, “The Policy fails to define ‘interior tile’ work. Nor does it indicate the scope or extent of what constitutes ‘tiling work’ or articulate whether the phrase was meant to encompass closely related preparatory tasks, which is a reasonable interpretation advanced by [the insured].” The court construed the ambiguities against Mount Hawley, “resulting in coverage as a matter of law.” [Mt. Hawley Ins. Co. v. Michelle Kuo Corp., 2026 N.Y. Slip Op. 00427, 2026 N.Y. App. Div. LEXIS 500 (1st Dep’t Jan. 29, 2026).]

First Department Finds Coverage Obligation Is Triggered By Permit Requiring Additional Insured Coverage

Scottsdale Insurance Company defended the City of New York in an underlying action for approximately three years before disclaiming coverage on the basis that there is no written contract requiring Scottsdale’s named insured to name the City as an additional insured on the Scottsdale policy. Scottsdale filed an action against the City seeking a declaration of no coverage and the City counterclaimed for a declaration of coverage. Both parties moved for summary judgment and the Supreme Court granted the City’s motion and denied Scottsdale’s motion. On appeal, the Appellate Division, First Department, affirmed, finding Scottsdale has a duty to defend and to indemnify the City. The court explained that “a binding agreement may be assembled from more than one writing.” Scottsdale’s named insured applied for a permit from the Department of Transportation and the DOT issued a permit that required the named insured to procure additional insured coverage for the City, among other things. The named insured accepted the permit, began work, and a certificate of insurance was issued identifying the City as an additional insured on the Scottsdale policy. The court found that the permit “was part of a binding agreement in which the contractor agreed to abide by its terms and conditions in order to obtain DOT’s permission to perform work.” The court further found that, in any event, Scottsdale is estopped from disclaiming coverage because Scottsdale defended the City for three years and “allowing [Scottsdale] to disclaim its defense obligations years later would prejudice the City.” The court also affirmed the lower court’s award of attorneys’ fees to the City because Scottsdale “cast [the City] in a defensive posture … in an effort to free itself from its policy obligations” and the City prevailed. [Scottsdale Ins. Co. v. The City of N.Y., 2026 N.Y. Slip Op. 00031, 245 N.Y.S.3d 238 (1st Dep’t Jan. 6, 2026).]